Print Friendly, PDF & Email

Holder of a bill of lading becoming party to the contract of carriage by virtue of s2 of COGSA 1992 bound by arbitration clause despite not having incurred liability by triggering events mentioned in s3

The voyage

Seven thousand mt soyabean meal was shipped from San Lorenzo, Argentina, to Agadir and Casablanca (originally) and (eventually) to Lebanon under an amended Norgrain 89 Voyage CP which contained a London arbitration clause.

Oleaginosa was the shipper. Oleaginosa sold to Glencore who sold to Agribusiness.

Agribusiness tried unsuccessfully to sell to SARL El Alf, Algeria and then Black Sea Grain SARL, Lebanon.

Finally, Agribusiness sold to Yousuf Freia & Sons, Lebanon.

No cargo was discharged at Agadir. From there the vessel sailed to Casablanca where it incurred demurrage.

From Casablanca it sailed to Oran, Algeria where further demurrage was incurred.

From Oran it sailed to Lebanon (Beirut or Tripoli) where the cargo was discharged.

The Bills of Lading

The original bills of lading were on the Congenbill 2007 form, discharge Agadir and Casablanca.

The bills named Oleaginosa as the shipper and were indorsed to order.

The arbitration clause in the VCP was expressly incorporated.

When the Morocco sale fell through, a switch bill was issued to provide for discharge in Algeria.

When the Algeria sale fell through, a second switch bill was issued to provide for discharge in Lebanon.

The contracts of sale and the letters of credit

The original bills of lading were presented by Glencore to the Arab Bank, Switzerland, who paid on behalf of Glencore’s purchaser, Agribusiness.

There was a pledge agreement in place between the Bank and Agribusiness pursuant to which Agribusiness assigned its rights under documents of title (such as the bills in question) in return for upfront finance.


As matters turned out, the Bank commenced arbitration proceedings against the ship owners in respect of different cargo. Owners counter-claimed for demurrage incurred at Casablanca and Oran.

The bank argued that it held the second switch bill as security only and was not party to the arbitration agreement. Thus the tribunal lacked jurisdiction.


An unnamed tribunal upheld the owners’ argument.

On appeal under s67 of the Arbitration Act 1996, Popplewell J raised the point, suo motu, that, put at its lowest, the Bank had rights to the second switch bill afforded by s2 of COGSA 1992.  Because arbitration clauses are collateral and do not require parties to be bound to the main agreement, it did not matter, for the purpose of the efficacy of the arbitration clause,  that the Bank may not have been an original party to the bill.

This meant that the tribunal, by law, had the jurisdiction to determine its own jurisdiction. Its decision in this regard would then be subject to less stringent scrutiny by the Court.

The Bank’s appeal was upheld and the matter remitted to the tribunal to determine whether the Bank was an original party to the bill and so potentially liable for demurrage.


The undisputed facts suggest that the Bank did become owner of the cargo on negotiation of the original bills and was therefore an original party to the second  switch bill.

This was the real issue and the Court should have decided it there and then.

The judgment contains a valuable discussion on the accessory nature of an arbitration clause inserted in a commercial contract.




This content is restricted to site members. If you are an existing user, please login. New users may register below.

Existing Users Log In
New User Registration
Please indicate that you agree to the Terms of Service *
*Required field
Charter Party Casebook